OBI Budget 2018 Summary – In Association with Accounts Lab

This year, we’ve teamed up with Accounts Lab to bring you an analysis of the 2018 Budget.

It was the Chancellor’s final Budget before Brexit and many commentators had rumoured an end to years of austerity.

Edward Kirkby from Accounts Lab has cut through the red tape to summarise the main announcements that will impact business, Manchester and the North of England.

Corporation Tax

The government has already ensured the UK is a prime location to invest, from cutting the corporation tax rate to 19% and they remain committed for it to fall to 17% in 2020.

Digital Services Tax

A tax on the revenues of certain digital businesses has been rumoured for a while, and this announcement is expected to raise £400m per year. Digital tech giants will be taxed 2% on the money they make from UK users, with the tax applying to revenues generated from the provision of the following business activities: search engines, social media platforms and online marketplaces. The chancellor said the tax will be “narrowly targeted” on UK generated revenues of specific firms, rather than UK tech startups.

Annual investment allowance.
The annual investment allowance will be increased from £200,000 to £1m for two years. This is good news for companies with large capital expenditure.

Entrepreneurs’ Relief

Entrepreneurs’ relief has long been rumoured to be abolished, but the Chancellor made a point of showing his support. There was, however, a change to the minimum qualifying period. To support longer-term business investments, from 6 April 2019 the minimum period throughout which the qualifying conditions for relief must be met will be extended from 12 months to 24 months.

IR35 – Off-payroll working in the private sector

The government announced that they will reform the off-payroll working rules (known as IR35) in the private sector. This follows the recent roll-out of reform in the public sector where responsibility for operating the off-payroll working rules moved from individuals to the organisation, agency or other third party engaging the worker. This change will not be introduced until April 2020 with small organisations being exempt, minimising administrative burdens for the vast majority of engagers

Employment Allowance

The Employment Allowance provides businesses and charities with up to £3,000 off their employer NICs bill. From April 2020, the Employment Allowance will be restricted to employers with an employer National Insurance contributions (NICs) bill below £100,000 in their previous tax year.
Over 99% of micro-businesses and 93% of small businesses will still be eligible.

Research & Development Tax Credits

From 1 April 2020, the payable R&D tax credit that a qualifying loss-making company can receive in any tax year will be restricted to three times the company’s total PAYE and NICs liability for that year. This will be a blow to tech startups, but HMRC believe the change will prevent fraudulent claims worth £300 million.

Business Rates Cuts

As leaked many days ago, business rates have been reduced by the Chancellor. All companies with a rateable value of £51,000 or less, the government will cut their business rates bill by one third. A saving for 90% of shops, restaurants and cafes.

Manchester Skills Pilot
The government will fund £20 million of skills pilots. This will include:

– a new £3 million pilot to help employers in Greater Manchester and surrounding areas to address local digital skills gaps through short training courses.
– a £10 million pilot in Greater Manchester, working with the Federation of Small Businesses, to test what forms of government support are most effective in increasing training levels for the self-employed
– £7 million match funding alongside employers to provide on-the-job training to young people not currently in employment, education or training in Greater Manchester, and to move them into sustainable career paths with employers

Regional Announcements

The Chancellor also announced the following Northern regional announcements:

North West

– An additional £69.5m Transforming Cities Fund allocation to support transport projects in Greater Manchester Combined Authority, and an additional £38.5m to support transport projects in Liverpool City Region Combined Authority.
– Up to £37m additional development funding to support Northern Powerhouse Rail.
– £20m for skills pilots in Greater Manchester, including £10m to support training for the self-employed.

North East

– An additional £16.5m Transforming Cities Fund allocation to support transport projects in the Tees Valley Combined Authority; North East Combined Authority shortlisted for share of £440m increase to the competitive allocation of the Transforming Cities Fund.
– Plans for a Special Economic Area for the South Tees Development Corporation and up to £14m to develop the site

Yorkshire & The Humber

– Sheffield City Region and West Yorkshire Combined Authority shortlisted for share of £440m increase to the competitive allocation of the Transforming Cities Fund.
– Up to £37m additional development funding to support Northern Powerhouse Rail.